Douglas Emmett Inc 10-K

Item 9A. Controls and Procedures As of December 31, 2021, the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Report. Based on the foregoing, our CEO and CFO concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate, to allow for timely decisions regarding required disclosure. There have not been any changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon appear at pages F-1 and F-4 , respectively, and are incorporated herein by reference. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 53 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors (Proposal 1) – Information Concerning Current Directors and Nominees”, “Information About Our Executive Officers”, “Corporate Governance”, “Board Meetings and Committees” and “Delinquent Section 16(a) Reports” (to the extent required), in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information set forth under the captions “Executive Compensation”, “Compensation Committee Report”, “Director Compensation”, and “Compensation Committee Interlocks and Insider Participation”, in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Securities Authorized for Issuance Under Stock-Based Compensation Plan The following table presents information with respect to shares of our common stock that may be issued under our existing stock incentive plan as of December 31, 2021: Plan Category Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights (In thousands) Weighted-average exercise price of outstanding options, warrants and rights Number of shares of common stock remaining available for future issuance under stock-based compensation plans (excluding shares reflected in column (a)) (In thousands) (a) (b) (c) Stock-based compensation plans approved by stockholders (1) 2,595 (2) $— (3) 6,854 ___________________________________________________________ (1) For a description of our 2016 Omnibus Stock Incentive Plan, see Note 13 to our consolidated financial statements in Item 15 of this Report. We did not have any other stock-based compensation plans as of December 31, 2021. (2) Consists of 1.6 million vested and 1.0 million unvested LTIP Units. (3) We have no outstanding options. There are no exercise prices for LTIP Units. The remaining information required by this item is incorporated by reference to the information set forth under the caption “Voting Securities and Principal Stockholders—Security Ownership of Certain Beneficial Owners and Management”, in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors (Proposal 1) – Information Concerning Current Directors and Nominees”, “Corporate Governance” and “Transactions With Related Persons”, in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021. Item 14. Principal Accounting Fees and Services Our Independent Registered Public Accounting Firm is Ernst & Young LLP , Los Angeles California , PCAOB Firm ID: 42 . The information required by this item is incorporated by reference to the information set forth under the caption “Independent Registered Public Accounting Firm” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021. 54 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedule (a)(1) and (2) Financial Statements and Schedules Index Page Exhibits 56 Signatures 58 Report of Management on Internal Control Over Financial Reporting F- 1 Report of Independent Registered Public Accounting Firm F- 2 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting F- 4 Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Income (Loss) F- 7 Consolidated Statements of Equity F- 8 Consolidated Statements of Cash Flows F- 10 Notes to Consolidated Financial Statements F- 11 Overview F- 11 Summary of Significant Accounting Policies F- 12 Investment in Real Estate F- 19 Ground Lease F- 21 Acquired Lease Intangibles F- 22 Investments in Unconsolidated Funds F- 23 Other Assets F- 24 Secured Notes Payable & Revolving Credit Facility, Net F- 25 Interest Payable, Accounts Payable and Deferred Revenue F- 27 Derivative Contracts F- 28 Equity F- 31 EPS F- 33 Stock-Based Compensation F- 34 Fair Value of Financial Instruments F- 36 Segment Reporting F- 38 Future Minimum Lease Receipts F- 39 Commitments, Contingencies and Guarantees F- 39 Schedule III - Consolidated Real Estate and Accumulated Depreciation F- 41 Note: All other schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or notes thereto. 55 Table of Contents Douglas Emmett, Inc. Exhibits (a)(3) exhibits Number Description Footnote 3.1 Articles of Amendment and Restatement of Douglas Emmett, Inc. (1) 3.2 Bylaws of Douglas Emmett, Inc. (2) 3.3 Certificate of Correction to Articles of Amendment and Restatement of Douglas Emmett, Inc. (3) 3.4 Bylaws Amendment (4) 4.1 Form of Certificate of Common Stock of Douglas Emmett, Inc. (5) 4.2 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934* 10.1 Form of Agreement of Limited Partnership of Douglas Emmett Properties, LP. (5) 10.2 Registration Rights Agreement among Douglas Emmett, Inc. and the Initial Holders named therein. + (6) 10.3 Form of Indemnification Agreement between Douglas Emmett, Inc. and its directors and officers. + (7) 10.4 Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan. + (8) 10.5 Form of Douglas Emmett Properties, LP Partnership Unit Designation – 2016 LTIP Units. + (9) 10.6 Form of Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan LTIP Unit Award Agreement. + * 10.7 Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Jordan L. Kaplan. + (10) 10.8 Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kenneth Panzer. + (10) 10.9 Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kevin A. Crummy. + (10) 21.1 List of Subsidiaries of the Registrant. * 23.1 Consent of Independent Registered Public Accounting Firm. * 31.1 Certificate of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certificate of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certificate of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * (11) 32.2 Certificate of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * (11) 101.INS Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.* 101.SCH Inline XBRL Taxonomy Extension Schema Document.* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.* 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)* * Filed with this Annual Report on Form 10-K . + Denotes management contract or compensatory plan, contract or arrangement. (1) Filed with Amendment No. 6 to Form S-11 on October 19, 2006 and incorporated herein by this reference. (File number 333-135082) (2) Filed with Form 8-K on September 6, 2013 and incorporated herein by this reference. (File number 001-33106) (3) Filed with Form 8-K on October 30, 2006 and incorporated herein by this reference. (File number 001-33106) (4) Filed with Form 8-K on April 9, 2018 and incorporated herein by this reference. (File number 001-33106) 56 Table of Contents Douglas Emmett, Inc. Exhibits (continued) (5) Filed with Amendment No. 3 to Form S-11 on October 3, 2006 and incorporated herein by this reference. (File number 333-135082) (6) Filed with Form S-11 on June 16, 2006 and incorporated herein by this reference. (File number 333-135082) (7) Filed with Amendment No. 2 to Form S-11 on September 20, 2006 and incorporated herein by this reference. (File number 333-135082) (8) Filed with Definitive Proxy Statement on April 17, 2020 and incorporated herein by this reference. (File number 001-33106) (9) Filed with Form 8-K on December 12, 2016 and incorporated herein by this reference. (File number 001-33106) (10) Filed with Form 8-K on December 21, 2018 and incorporated herein by this reference. (File number 001-33106) (11) In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed as part of this Report on Form 10-K or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement. Item 16. Form 10-K Summary None. 57 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. DOUGLAS EMMETT, INC. Dated: By: /s/ JORDAN L. KAPLAN February 18, 2022 Jordan L. Kaplan President and CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the persons below, in their respective capacities, on behalf of the registrant as of February 18, 2022. Signature Title /s/ JORDAN L. KAPLAN Jordan L. Kaplan President, CEO and Director (Principal Executive Officer) /s/ PETER D. SEYMOUR Peter D. Seymour CFO (Principal Financial and Accounting Officer) /s/ DAN A. EMMETT Dan A. Emmett Chairman of the Board /s/ KENNETH M. PANZER Kenneth M. Panzer COO and Director /s/ LESLIE E. BIDER Leslie E. Bider Director /s/ DORENE C. DOMINGUEZ Dorene C. Dominguez Director /s/ DR. DAVID T. FEINBERG Dr. David T. Feinberg Director /s/ VIRGINIA A. MCFERRAN Virginia A. McFerran Director /s/ THOMAS E. O’HERN Thomas E. O’Hern Director /s/ WILLIAM E. SIMON, JR. William E. Simon, Jr. Director /s/ JOHNESE M. SPISSO Johnese M. Spisso Director 58 Table of Contents Report of Management on Internal Control over Financial Reporting The management of Douglas Emmett, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our system of internal control is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external reporting purposes in accordance with US GAAP. Our management, including the undersigned CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In conducting its assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control—Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria. Management, including our CEO and CFO, does not expect that our disclosure controls and procedures, or our internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this annual report, as stated in their report appearing on page F-4 , which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2021. /s/ JORDAN L. KAPLAN Jordan L. Kaplan President and CEO /s/ PETER D. SEYMOUR Peter D. Seymour CFO February 18, 2022 F- 1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Douglas Emmett, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Douglas Emmett, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021 and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. F- 2 Table of Contents Impairment of investment in real estate Description of the Matter The Company’s net investment in real estate totaled $8.8 billion as of December 31, 2021. As discussed in Note 2 to the consolidated financial statements, the Company periodically assesses whether there has been any impairment in the carrying value of its properties and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. Impairment is recognized on real estate assets held for investment when indicators of impairment are present and the future undiscounted cash flows for a real estate asset are less than its carrying amount, at which time the real estate asset is written down to its estimated fair value. Auditing the Company's impairment assessment for real estate assets was challenging because of the high degree of subjective auditor judgment necessary in evaluating management’s identification of indicators of potential impairment. Our evaluation of management’s identification of indicators of impairment included our related assessment of the severity of such indicators, either individually or in combination, in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of the real estate asset. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s real estate asset impairment assessment process. For example, we tested controls over management’s process for identifying and evaluating potential impairment indicators. Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment existed for the Company’s real estate assets. Our procedures included obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. For example, we searched for any tenants or groups of tenants with significant write offs or upcoming lease expirations that occupy a substantial portion of a real estate asset. We also searched for any significant declines in operating results of a real estate asset due to occupancy changes, environmental issues, physical damage, change in intended use or adverse changes in legal factors. /s/ Ernst & Young LLP We have served as the Company's auditor since 1995. Los Angeles, California February 18, 2022 F- 3 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Douglas Emmett, Inc. Opinion on Internal Control over Financial Reporting We have audited Douglas Emmett, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Douglas Emmett, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Douglas Emmett, Inc. as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021 and related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated February 18, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Los Angeles, California February 18, 2022 F- 4 Table of Contents Douglas Emmett, Inc. Consolidated Balance Sheets (In thousands, except share data) December 31, 2021 December 31, 2020 Assets Investment in real estate, gross $ 11,819,077 $ 11,678,638 Less: accumulated depreciation and amortization ( 3,028,645 ) ( 2,816,193 ) Investment in real estate, net 8,790,432 8,862,445 Ground lease right-of-use asset 7,464 7,472 Cash and cash equivalents 335,905 172,385 Tenant receivables 13,127 18,226 Deferred rent receivables 115,148 116,199 Acquired lease intangible assets, net 4,168 5,141 Interest rate contract assets 15,473 — Investment in unconsolidated Fund 46,594 47,374 Other assets 25,721 21,583 Total Assets $ 9,354,032 $ 9,250,825 Liabilities Secured notes payable and revolving credit facility, net $ 5,012,076 $ 4,744,967 Ground lease liability 10,860 10,871 Interest payable, accounts payable and deferred revenue 145,460 144,344 Security deposits 55,285 56,247 Acquired lease intangible liabilities, net 24,710 35,223 Interest rate contract liabilities 69,930 214,016 Dividends payable 49,158 49,138 Total liabilities 5,367,479 5,254,806 Equity Douglas Emmett, Inc. stockholders' equity: Common Stock, $ 0.01 par value, 750,000,000 authorized, 175,529,133 and 175,463,887 outstanding at December 31, 2021 and December 31, 2020, respectively 1,755 1,755 Additional paid-in capital 3,488,886 3,487,887 Accumulated other comprehensive loss ( 38,774 ) ( 148,035 ) Accumulated deficit ( 1,035,798 ) ( 904,516 ) Total Douglas Emmett, Inc. stockholders' equity 2,416,069 2,437,091 Noncontrolling interests 1,570,484 1,558,928 Total equity 3,986,553 3,996,019 Total Liabilities and Equity $ 9,354,032 $ 9,250,825 See accompanying notes to the consolidated financial statements. F- 5 Table of Contents Douglas Emmett, Inc. Consolidated Statements of Operations (In thousands, except per share data) Year Ended December 31, 2021 2020 2019 Revenues Office rental Rental revenues and tenant recoveries $ 704,946 $ 680,359 $ 694,315 Parking and other income 81,924 90,810 122,440 Total office revenues 786,870 771,169 816,755 Multifamily rental Rental revenues 116,095 107,011 110,697 Parking and other income 15,432 13,343 9,230 Total multifamily revenues 131,527 120,354 119,927 Total revenues 918,397 891,523 936,682 Operating Expenses Office expenses 265,376 268,259 264,482 Multifamily expenses 38,025 37,154 33,681 General and administrative expenses 42,554 39,601 38,068 Depreciation and amortization 371,289 385,248 357,743 Total operating expenses 717,244 730,262 693,974 Other income 2,465 16,288 11,653 Other expenses ( 937 ) ( 2,947 ) ( 7,216 ) Income from unconsolidated Funds 946 430 6,923 Interest expense ( 147,496 ) ( 142,872 ) ( 143,308 ) Gain on sale of investment in real estate — 6,393 — Gain from consolidation of JV — — 307,938 Net income 56,131 38,553 418,698 Less: Net loss (income) attributable to noncontrolling interests 9,136 11,868 ( 54,985 ) Net income attributable to common stockholders $ 65,267 $ 50,421 $ 363,713 Net income per common share – basic and diluted $ 0.37 $ 0.28 $ 2.09 See accompanying notes to the consolidated financial statements. F- 6 Table of Contents Douglas Emmett, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Year Ended December 31, 2021 2020 2019 Net income $ 56,131 $ 38,553 $ 418,698 Other comprehensive income (loss): cash flow hedges 158,923 ( 183,521 ) ( 107,292 ) Comprehensive income (loss) 215,054 ( 144,968 ) 311,406 Less: Comprehensive (income) loss attributable to noncontrolling interests ( 40,526 ) 64,816 ( 19,099 ) Comprehensive income (loss) attributable to common stockholders $ 174,528 $ ( 80,152 ) $ 292,307 See accompanying notes to the consolidated financial statements. F- 7 Table of Contents Douglas Emmett, Inc. Consolidated Statements of Equity (In thousands, except per share data) Year Ended December 31, 2021 2020 2019 Shares of Common Stock Beginning balance 175,464 175,370 170,215 Exchange of OP Units for common stock 65 94 222 Issuance of common stock — — 4,933 Ending balance 175,529 175,464 175,370 Common Stock Beginning balance $ 1,755 $ 1,754 $ 1,702 Exchange of OP Units for common stock — 1 2 Issuance of common stock — — 50 Ending balance $ 1,755 $ 1,755 $ 1,754 Additional Paid-in Capital Beginning balance $ 3,487,887 $ 3,486,356 $ 3,282,316 Exchange of OP Units for common stock 1,056 1,535 3,538 Repurchase of OP Units with cash ( 57 ) ( 4 ) ( 431 ) Issuance of common stock, net — — 200,933 Ending balance $ 3,488,886 $ 3,487,887 $ 3,486,356 AOCI Beginning balance $ ( 148,035 ) $ ( 17,462 ) $ 53,944 Cash flow hedge adjustments 109,261 ( 130,573 ) ( 71,406 ) Ending balance $ ( 38,774 ) $ ( 148,035 ) $ ( 17,462 ) Accumulated Deficit Beginning balance $ ( 904,516 ) $ ( 758,576 ) $ ( 935,630 ) ASU 2016-02 adoption — — ( 2,144 ) Net income attributable to common stockholders 65,267 50,421 363,713 Dividends ( 196,549 ) ( 196,361 ) ( 184,515 ) Ending balance $ ( 1,035,798 ) $ ( 904,516 ) $ ( 758,576 ) Noncontrolling Interests Beginning balance $ 1,558,928 $ 1,658,862 $ 1,446,098 ASU 2016-02 adoption — — ( 355 ) Net (loss) income attributable to noncontrolling interests ( 9,136 ) ( 11,868 ) 54,985 Cash flow hedge adjustments 49,662 ( 52,948 ) ( 35,886 ) Contributions — — 176,000 Consolidation of JV — — 61,394 Distributions ( 54,919 ) ( 60,392 ) ( 76,978 ) Issuance of OP Units for acquisition of additional interest in unconsolidated Fund — — 14,390 Exchange of OP Units for common stock ( 1,056 ) ( 1,536 ) ( 3,540 ) Repurchase of OP Units with cash ( 65 ) ( 3 ) ( 303 ) Stock-based compensation 27,070 26,813 23,057 Ending balance $ 1,570,484 $ 1,558,928 $ 1,658,862 F- 8 Table of Contents Douglas Emmett, Inc. Consolidated Statements of Equity (In thousands, except per share data) Year Ended December 31, 2021 2020 2019 Total Equity Beginning balance $ 3,996,019 $ 4,370,934 $ 3,848,430 ASU 2016-02 adoption — — ( 2,499 ) Net income 56,131 38,553 418,698 Cash flow hedge adjustments 158,923 ( 183,521 ) ( 107,292 ) Consolidation of JV — — 61,394 Issuance of common stock, net — — 200,983 Issuance of OP Units for acquisition of additional interest in unconsolidated Fund — — 14,390 Repurchase of OP Units with cash ( 122 ) ( 7 ) ( 734 ) Contributions — — 176,000 Dividends ( 196,549 ) ( 196,361 ) ( 184,515 ) Distributions ( 54,919 ) ( 60,392 ) ( 76,978 ) Stock-based compensation 27,070 26,813 23,057 Ending balance $ 3,986,553 $ 3,996,019 $ 4,370,934 Dividends declared per common share $ 1.12 $ 1.12 $ 1.06 See accompanying notes to the consolidated financial statements. F- 9 Table of Contents Douglas Emmett, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2021 2020 2019 Operating Activities Net income $ 56,131 $ 38,553 $ 418,698 Adjustments to reconcile net income to net cash provided by operating activities: Income from unconsolidated Funds ( 946 ) ( 430 ) ( 6,923 ) Gain from insurance recoveries for damage to real estate — ( 13,105 ) — Gain on sale of investment in real estate — ( 6,393 ) — Gain from consolidation of JV — — ( 307,938 ) Depreciation and amortization 371,289 385,248 357,743 Net accretion of acquired lease intangibles ( 9,541 ) ( 15,878 ) ( 16,264 ) Straight-line rent 1,051 18,733 ( 10,134 ) Loan premium amortized and written off ( 460 ) ( 2,274 ) ( 261 ) Deferred loan costs amortized and written off 10,902 7,832 14,314 Amortization of stock-based compensation 20,887 21,365 18,359 Operating distributions from unconsolidated Funds 943 394 6,820 Change in working capital components: Tenant receivables 5,099 ( 11,645 ) ( 609 ) Interest payable, accounts payable and deferred revenue ( 2,842 ) 5,557 ( 6,844 ) Security deposits ( 962 ) ( 4,676 ) 1,919 Other assets ( 4,600 ) ( 3,063 ) 706 Net cash provided by operating activities 446,951 420,218 469,586 Investing Activities Capital expenditures for improvements to real estate ( 108,499 ) ( 143,445 ) ( 176,448 ) Capital expenditures for developments ( 184,592 ) ( 154,153 ) ( 61,660 ) Insurance recoveries for damage to real estate 3,041 17,120 — Property acquisition — — ( 365,885 ) Cash assumed from consolidation of JV — — 39,226 Proceeds from sale of investment in real estate, net — 20,658 — Acquisition of additional interests in unconsolidated Funds — ( 6,591 ) ( 90,754 ) Capital distributions from unconsolidated Funds 1,342 1,236 5,853 Net cash used in investing activities ( 288,708 ) ( 265,175 ) ( 649,668 ) Financing Activities Proceeds from borrowings 1,345,000 674,000 2,185,000 Repayment of borrowings ( 1,075,787 ) ( 549,752 ) ( 2,095,718 ) Loan cost payments ( 12,397 ) ( 3,846 ) ( 21,348 ) Contributions from noncontrolling interests in consolidated JVs — — 163,556 Distributions paid to noncontrolling interests ( 54,919 ) ( 60,392 ) ( 64,534 ) Dividends paid to common stockholders ( 196,529 ) ( 196,333 ) ( 179,667 ) Repurchase of OP Units ( 122 ) ( 7 ) ( 734 ) Proceeds from issuance of common stock, net — — 200,983 Net cash provided by (used in) financing activities 5,246 ( 136,330 ) 187,538 Increase in cash and cash equivalents and restricted cash 163,489 18,713 7,456 Cash and cash equivalents and restricted cash - beginning balance 172,517 153,804 146,348 Cash and cash equivalents and restricted cash - ending balance $ 336,006 $ 172,517 $ 153,804 Reconciliation of Ending Cash Balance Year Ended December 31, 2021 2020 2019 Cash and cash equivalents - ending balance $ 335,905 $ 172,385 $ 153,683 Restricted cash - ending balance 101 132 121 Cash and cash equivalents and restricted cash - ending balance $ 336,006 $ 172,517 $ 153,804 Supplemental Cash Flows Information Year Ended December 31, 2021 2020 2019 Operating Activities Cash paid for interest, net of capitalized interest $ 136,999 $ 136,823 $ 128,205 Capitalized interest paid $ 8,814 $ 4,810 $ 3,782 Non-cash Investing Transactions Accrual for real estate and development capital expenditures $ 38,101 $ 37,185 $ 35,398 Capitalized stock-based compensation for improvements to real estate and developments $ 6,183 $ 5,448 $ 4,698 Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles $ 157,325 $ 73,045 $ 88,205 Removal of fully amortized acquired lease intangible assets $ 442 $ 372 $ 2,132 Removal of fully accreted acquired lease intangible liabilities $ 23,725 $ 20,649 $ 29,660 Recognition of ground lease right-of-use asset - Adoption of ASU 2016-02 $ — $ — $ 10,885 Above-market ground lease intangible liability offset against right-of-use asset - Adoption of ASU 2016-02 $ — $ — $ 3,408 Recognition of ground lease liability - Adoption of ASU 2016-02 $ — $ — $ 10,885 Non-cash Financing Transactions Gain (loss) recorded in AOCI - consolidated derivatives $ 82,876 $ ( 232,652 ) $ ( 76,273 ) Gain (loss) recorded in AOCI - unconsolidated Funds' derivatives (our share) $ 569 $ ( 410 ) $ ( 5,023 ) Accrual for deferred loan costs $ 150 $ 50 $ 1,416 Non-cash contributions from noncontrolling interests in consolidated JVs $ — $ — $ 12,444 Non-cash distributions to noncontrolling interests $ — $ — $ 12,444 Dividends declared $ 196,549 $ 196,361 $ 184,515 Exchange of OP Units for common stock $ 1,056 $ 1,536 $ 3,540 OP Units issued for acquisition of additional interest in unconsolidated Fund $ — $ — $ 14,390 See accompanying notes to the consolidated financial statements. F- 10 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements 1. Overview Organization and Business Description Douglas Emmett, Inc. is a fully integrated, self-administered and self-managed REIT. We are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and Honolulu, Hawaii. Through our interest in our Operating Partnership and its subsidiaries, consolidated JVs and unconsolidated Fund, we focus on owning, acquiring, developing and managing a substantial market share of top-tier office properties and premier multifamily communities in neighborhoods that possess significant supply constraints, high-end executive housing and key lifestyle amenities. The terms "us," "we" and "our" as used in the consolidated financial statements refer to Douglas Emmett, Inc. and its subsidiaries on a consolidated basis. At December 31, 2021, our Consolidated Portfolio consisted of (i) a 17.8 million square foot office portfolio, (ii) 4,388 multifamily apartment units and (iii) fee interests in two parcels of land from which we receive rent under ground leases. We also manage and own an equity interest an unconsolidated Fund which, at December 31, 2021, owned an additional 0.4 million square feet of office space. We manage our unconsolidated Fund alongside our Consolidated Portfolio, and we therefore present the statistics for our office portfolio on a Total Portfolio basis. As of December 31, 2021, our portfolio (not including two parcels of land from which we receive rent under ground leases), consisted of the following properties (including ancillary retail space): Consolidated Portfolio Total Portfolio Office Wholly-owned properties 53 53 Consolidated JV properties 16 16 Unconsolidated Fund properties — 2 69 71 Multifamily Wholly-owned properties 11 11 Consolidated JV properties 1 1 12 12 Total 81 83 Basis of Presentation The accompanying consolidated financial statements are the consolidated financial statements of Douglas Emmett, Inc. and its subsidiaries, including our Operating Partnership and our consolidated JVs. All significant intercompany balances and transactions have been eliminated in our consolidated financial statements. We consolidate entities in which we are considered to be the primary beneficiary of a VIE or have a majority of the voting interest of the entity. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of that VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We do not consolidate entities in which the other parties have substantive kick-out rights to remove our power to direct the activities, most significantly impacting the economic performance, of that VIE. In determining whether we are the primary beneficiary, we consider factors such as ownership interest, management representation, authority to control decisions, and contractual and substantive participating rights of each party. We consolidate our Operating Partnership through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets, and are obligated to repay substantially all of our liabilities. The consolidated debt, excluding our consolidated JVs, was $ 3.41 billion and $ 3.19 billion, as of December 31, 2021 and December 31, 2020, respectively. See Note 8. We also consolidate three JVs through our Operating Partnership ( four JVs before December 31, 2020 - see "2020 Property Disposition" in Note 3 for more information regarding the dissolution of one of our JVs before December 31, 2020). We consolidate our Operating Partnership and our three JVs because they are VIEs and we or our Operating Partnership are the primary beneficiary for each. F- 11 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements As of December 31, 2021, our consolidated VIE entities, excluding our Operating Partnership, had aggregate consolidated assets of $ 3.56 billion (of which $ 3.28 billion related to investment in real estate) and aggregate consolidated liabilities of $ 1.72 billion (of which $ 1.64 billion related to debt). As of December 31, 2020, our consolidated VIE entities, excluding our Operating Partnership, had aggregate consolidated assets of $ 3.58 billion (of which $ 3.37 billion related to investment in real estate) and aggregate consolidated liabilities of $ 1.73 billion (of which $ 1.59 billion related to debt). The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC in conformity with US GAAP as established by the FASB in the ASC. The accompanying consolidated financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. Any references to the number or class of properties, square footage, per square footage amounts, apartment units and geography, are unaudited and outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the PCAOB. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make certain estimates that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Investment in Real Estate Acquisitions and Initial Consolidation of VIEs We account for property acquisitions as asset acquisitions, and include the acquired properties' results of operations in our results of operations from the respective acquisition date. We allocate the purchase price for asset acquisitions, which includes the capitalized transaction costs, and for the properties upon the initial consolidation of VIEs not determined to be a business, on a relative fair value basis to: (i) land, (ii) buildings and improvements, (iii) tenant improvements and identifiable intangible assets such as in-place at-market leases, (iv) acquired above- and below-market ground and tenant leases (including for renewal options), and if applicable (v) assumed debt and (vi) assumed interest rate swaps, based upon comparable sales for land, and the income approach using our estimates of expected future cash flows and other valuation techniques, which include but are not limited to, our estimates of rental rates, revenue growth rates, capitalization rates and discount rates, for other assets and liabilities. We estimate the relative fair values of the tangible assets on an ‘‘as-if-vacant’’ basis. The estimated relative fair value of acquired in-place at-market leases are the estimated costs to lease the property to the occupancy level at the date of acquisition, including the fair value of leasing commissions and legal costs. We evaluate the time period over which we expect such occupancy level to be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period. Above- and below-market ground and tenant leases are recorded as an asset or liability based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid or received pursuant to the in-place ground or tenant leases, respectively, and our estimate of the fair market rental rates for the corresponding in-place leases, over the remaining non-cancelable term of the lease. Assumed debt is recorded at fair value based upon the present value of the expected future payments and current interest rates. See Note 3 for our property acquisition disclosures. Depreciation and Amortization The assets and liabilities listed below are carried on our consolidated balance sheet net of the related accumulated depreciation or amortization/accretion, and any impairment charges. We accelerate depreciation for affected assets when we renovate our buildings or our buildings are impacted by new developments. When assets are sold or retired, their cost and related accumulated depreciation or amortization are removed from our consolidated balance sheet with the resulting gains or losses, if any, reflected in our results of operations for the respective period. • Buildings and improvements are depreciated on a straight-line basis using an estimated life of twenty-five to forty years for buildings and fifteen years for improvements. • Tenant improvements are depreciated on a straight-line basis over the life of the related lease, with any remaining balance depreciated in the period of any early lease termination. • Acquired in-place leases are amortized on a straight-line basis over the weighted average remaining term of the acquired in-place leases. F- 12 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) • Acquired lease intangibles are amortized on a straight-line basis over the related lease term, with any remaining balance amortized in the period of any early lease termination. • Acquired above- and below-market tenant leases are amortized/accreted on a straight line basis over the life of the related lease and recorded as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. • Acquired above- and below-market ground leases, from which we earn ground rent income, are amortized/accreted on a straight line basis over the life of the related lease and recorded either as an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. • Acquired above- and below-market ground leases, for which we incur ground rent expense, are accreted/ amortized over the life of the related lease and recorded either as an increase (for below-market leases) or a decrease (for above-market leases) to expense. Real Estate Held for Sale Properties are classified as held for sale in our consolidated balance sheets when they meet certain requirements, including the approval of the sale of the property, the marketing of the property for sale, and our expectation that the sale will likely occur within the next 12 months. Properties classified as held for sale are carried at the lower of their carrying value or fair value less costs to sell, and we also cease to depreciate the property. As of December 31, 2021 and 2020, we did not have any properties held for sale. Dispositions Recognition of gains or losses from sales of investments in real estate requires that we meet certain revenue recognition criteria and transfer control of the real estate to the buyer. The gain or loss recorded is measured as the difference between the sales price, less costs to sell, and the carrying value of the real estate when we sell it. See Note 3 for our property disposition disclosures. Cost capitalization Costs incurred during the period of construction of real estate are capitalized. Cost capitalization of development and redevelopment activities begins during the predevelopment period, which we define as the activities that are necessary to begin the development of the property. We cease capitalization upon substantial completion of the project, but no later than one year from cessation of major construction activity. We also cease capitalization when activities necessary to prepare the property for its intended use have been suspended. Capitalized costs are included in Investment in real estate, gross, in our consolidated balance sheets. Demolition expenses and repairs and maintenance are recorded as expense when incurred. During 2021, 2020 and 2019, we capitalized $ 185.4 million, $ 186.4 million and $ 75.3 million of costs related to our developments, respectively, which included $ 8.8 million, $ 4.8 million and $ 3.8 million of capitalized interest, respectively. Ground Lease We account for our ground lease, for which we are the lessee, in accordance with Topic 842 "Leases". We classify the ground lease as an operating lease, and we recognize a right-of-use asset for the land and a lease liability for the future lease payments. We recognize the lease payments as expense, which is included in Office expenses in our consolidated statements of operations. See Note 4 for more information regarding this ground lease. See Note 14 for the fair value disclosures related to the ground lease liability. Investment in Unconsolidated Fund As of December 31, 2021 and 2020, we managed and owned an equity interest in one unconsolidated Fund. Before November 21, 2019 we managed and owned equity interests in three unconsolidated Funds. See Note 6. F- 13 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) We account for our investment in our unconsolidated Fund using the equity method because we have significant influence but not control over the Fund. Under the equity method, we initially recorded our investment in our Fund at cost, which includes acquisition basis difference and additional basis for capital raising costs, and subsequently adjust the investment balance for: (i) our share of the Fund's net income or losses, (ii) our share of the Fund's other comprehensive income or losses, (iii) our cash contributions to the Fund and (iv) our distributions received from the Fund. We will remove our investment in our unconsolidated Fund from our consolidated balance sheet when we sell our interest in the Fund or if the Fund qualifies for consolidation. Our investment in our unconsolidated Fund is included in Investment in unconsolidated Fund in the consolidated balance sheets. Our share of our Fund's accumulated other comprehensive income or losses is included in Accumulated other comprehensive income (loss) in our consolidated balance sheets. As of December 31, 2021 and 2020, the total investment basis difference included in our investment balance in our unconsolidated Fund was $ 28.7 million and $ 29.6 million, respectively. Our share of the net income or losses from our Funds is included in Income from unconsolidated Funds in the consolidated statements of operations. We periodically assess whether there has been any impairment that is other than temporary in our investment in our unconsolidated Funds. An impairment charge would be recorded if events or changes in circumstances indicate that a decline in the fair value below the carrying value has occurred and the decline is other-than-temporary. Based upon such periodic assessments, no impairments occurred during 2021, 2020 or 2019. Impairment of Long-Lived Assets We periodically assess whether there has been any impairment in the carrying value of our properties and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. An impairment charge would be recorded if events or changes in circumstances indicate that a decline in the fair value below the carrying value has occurred and the decline is other-than-temporary. Recoverability of the carrying value of our properties is measured by a comparison of the carrying value to the undiscounted future cash flows expected to be generated by the property. If the carrying value exceeds the estimated undiscounted future cash flows, an impairment loss is recorded equal to the difference between the property's carrying value and its fair value based on the estimated discounted future cash flows. Based upon such periodic assessments, no impairments occurred during 2021, 2020 or 2019. Cash and Cash Equivalents We consider short-term investments with maturities of three months or less when purchased to be cash equivalents. Rental Revenues and Tenant Recoveries We account for our rental revenues and tenant recoveries in accordance with Topic 842 "Leases", which we adopted on January 1, 2019 on a modified retrospective basis. We adopted a practical expedient which allows us to account for our rental revenues and tenant recoveries on a combined basis. Rental revenues and tenant recoveries from tenant leases are included in Rental revenues and tenant recoveries in the consolidated statements of operations. All of our tenant leases are classified as operating leases. For lease terms exceeding one year, rental income is recognized on a straight-line basis over the lease term. Tenant receivables consist primarily of amounts due for contractual lease payments and reimbursements of common area maintenance expenses, property taxes, and other costs recoverable from tenants. Deferred rent receivables represent the amount by which the cumulative straight-line rental revenue recorded to date exceeds the cumulative cash rents billed to date under the lease agreement. Rental revenue from month-to-month leases or leases with no scheduled rent increases or other adjustments is recognized on a monthly basis when earned. Lease Terminations Lease termination fees, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, are recognized on a straight line basis over the new remaining lease term when the related lease is canceled. We recognized lease termination revenue of $ 1.2 million, $ 1.0 million and $ 0.5 million during 2021, 2020 and 2019, respectively. F- 14 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Tenant Improvements Tenant improvements constructed, and owned by us, and reimbursed by tenants are recorded as our assets, and the related revenue, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, is recognized over the related lease term. We recognized revenue for reimbursement of tenant improvements of $ 5.8 million, $ 5.9 million and $ 5.8 million during 2021, 2020 and 2019, respectively. Tenant Recoveries Estimated tenant recoveries for real estate taxes, common area maintenance and other recoverable operating expenses, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, are recognized as revenue on a gross basis in the period that the recoverable expenses are incurred. Subsequent to year-end, in accordance with our policy, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed to the tenant and the actual expenses incurred. Collectibility In accordance with Topic 842, we perform an assessment as to whether or not substantially all of the amounts due under a tenant’s lease agreement is deemed probable of collection. This assessment involves using a methodology that requires judgment and estimates about matters that are uncertain at the time the estimates are made, including tenant specific factors, specific industry conditions, and general economic trends and conditions. For leases where we have concluded it is probable that we will collect substantially all the lease payments due under those leases, we continue to record lease income on a straight-line basis over the lease term. For leases where we have concluded that it is not probable that we will collect substantially all the lease payments due under those leases, we limit the lease income to the lesser of the income recognized on a straight-line basis or cash basis. If our conclusion of collectibility changes, we will record the difference between the lease income that would have been recognized on a straight-line basis and cash basis as a current-period adjustment to rental revenues and tenant recoveries. We write-off tenant receivables and deferred rent receivables as a charge against rental revenues and tenant recoveries in the period we conclude that substantially all of the lease payments are not probable of collection. If we subsequently collect amounts that were previously written off then the amounts collected are recorded as an increase to our rental revenues and tenant recoveries in the period they are collected. Charges for uncollectible tenant receivables and deferred rent receivables, which were primarily due to the impact of the COVID-19 pandemic, reduced our office revenues by $ 3.0 million and $ 41.0 million in 2021 and 2020, respectively. Lease Modifications In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under the existing lease accounting guidance, we would be required to determine on a lease-by-lease basis if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows us, if certain criteria are met, to bypass the lease-by-lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We have availed ourselves of the election to avoid performing a lease-by-lease analysis and we have elected to apply the lease modification accounting framework for the lease concessions that meet the criteria. Office Parking Revenues Office parking revenues, which are included in office Parking and other income in our consolidated statements of operations, are within the scope of Topic 606 "Revenue from Contracts with Customers". Our lease contracts generally make a specified number of parking spaces available to the tenant, and we bill and recognize parking revenues on a monthly basis in accordance with the lease agreements, generally using the monthly parking rates in effect at the time of billing. Office parking revenues were $ 69.0 million, $ 76.1 million and $ 108.7 million in 2021, 2020 and 2019, respectively. Office parking receivables were $ 0.8 million and $ 0.6 million as of December 31, 2021 and 2020, respectively, and are included in Tenant receivables in our consolidated balance sheets. F- 15 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Insurance Recoveries The amount by which insurance recoveries related to property damage exceeds any losses recognized from that damage are recorded as other income when payment has been received or confirmation of the amount of proceeds has been received. In January 2020, there was a fire in one of our residential property buildings. We carry comprehensive liability and property insurance covering all of the properties in our portfolio under blanket insurance policies to cover these kinds of losses. We recorded $ 4.8 million and $ 3.9 million of business interruption revenues during 2021 and 2020, respectively, which is included in Multifamily rental - Parking and other income in the consolidated statements of operations. In addition, we recorded a gain related to property damage of $ 13.1 million during 2020, which is included in Other income in the consolidated statements of operations. Interest Income Interest income from our short-term money market fund investments is recognized on an accrual basis. Interest income is included in other income in the consolidated statements of operations. Leasing Costs We account for our leasing costs in accordance with Topic 842 "Leases", which we adopted on January 1, 2019 on a modified retrospective basis. In accordance with Topic 842, we capitalize initial direct costs of a lease, which are costs that would not have been incurred had the lease not been executed. Costs to negotiate a lease that would have been incurred regardless of whether the lease was executed, such as employee salaries, are not considered to be initial direct costs, and are expensed as incurred. Loan Costs Loan costs incurred directly with the issuance of secured notes payable and revolving credit facilities are deferred and amortized to interest expense over the respective loan or credit facility term. Any unamortized amounts are written off upon early repayment of the secured notes payable, and the related cost and accumulated amortization are removed from our consolidated balance sheets. To the extent that a refinancing is considered an exchange of debt with the same lender, we account for loan costs based upon whether the old debt is determined to be modified or extinguished for accounting purposes. If the old debt is determined to be modified then we (i) continue to defer and amortize any unamortized deferred loan costs associated with the old debt at the time of the modification over the new term of the modified debt, (ii) defer and amortize the lender costs incurred in connection with the modification over the new term of the modified debt, and (iii) expense all other costs associated with the modification. If the old debt is determined to be extinguished then we (i) write off any unamortized deferred loan costs associated with the extinguished debt at the time of the extinguishment and remove the related cost and accumulated amortization from our balance sheet, (ii) expense all lender costs associated with the extinguishment, and (iii) defer and amortize all other costs incurred directly in connection with the extinguishment over the term of the new debt. In circumstances where we modify or exchange our revolving credit facility with the same lender, we account for the loan costs based upon whether the borrowing capacity of the new arrangement is (a) equal to or greater than the borrowing capacity of the old arrangement, or (b) less than the borrowing capacity of the old arrangement (borrowing capacity is defined as the product of the remaining term and the maximum available credit). If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then we (i) continue to defer and amortize the unamortized deferred loan costs from the old arrangement over the term of the new arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement. If the borrowing capacity of the new arrangement is less than the borrowing capacity of the old arrangement, then we (i) write off any unamortized deferred loan costs at the time of the transaction related to the old arrangement in proportion to the decrease in the borrowing capacity of the old arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement. Deferred loan costs are presented on the balance sheet as a deduction from the carrying amount of our secured notes payable and revolving credit facility. All loan costs expensed and deferred loan costs amortized are included in interest expense in our consolidated statements of operations. See Note 8 for our loan cost disclosures. F- 16 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Debt Discounts and Premiums Debt discounts and premiums related to recording debt assumed in connection with property acquisitions at fair value are generally amortized and accreted, respectively, over the remaining term of the related loan, which approximates the effective interest method. The amortization/accretion is included in interest expense in our consolidated statements of operations. Derivative Contracts We make use of interest rate swap contracts to manage the risk associated with changes in interest rates on our floating-rate debt. When we enter into a floating-rate term loan, we generally enter into an interest rate swap agreement for the equivalent principal amount, for a period covering the majority of the loan term, which effectively converts our floating-rate debt to a fixed-rate basis during that time. We do not speculate in derivatives and we do not make use of any other derivative instruments. When entering into derivative agreements, we generally elect to designate them as cash flow hedges for accounting purposes. Changes in fair value of hedging instruments designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) (AOCI), which is a component of equity outside of earnings. For our Funds' hedging instruments designated as cash flow hedges, we record our share of the changes in fair value of the hedging instrument in AOCI. Amounts recorded in AOCI related to our designated hedges are reclassified to Interest expense as interest payments are made on the hedged floating rate debt. Amounts reported in AOCI related to our Funds' hedges are reclassified to Income from unconsolidated Funds, as interest payments are made by our Funds on their hedged floating rate debt. We present our derivatives on the balance sheet at fair value on a gross basis. Our share of the fair value of our Funds' derivatives is included in our investment in unconsolidated Funds on our consolidated balance sheet. See Note 10 for our derivative disclosures. Stock-Based Compensation We account for stock-based compensation, which includes grants of LTIP Units, using the fair value method of accounting. The estimated fair value of LTIP Units granted, net of estimated forfeitures, is amortized over the vesting period, which is based upon service. See Note 13 for our stock-based compensation disclosures. EPS We calculate basic EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares outstanding during the respective period. We calculate diluted EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the respective period using the treasury stock method. Unvested LTIP Units contain non-forfeitable rights to dividends and we account for them as participating securities and include them in the computation of basic and diluted EPS using the two-class method. See Note 12 for our EPS disclosures. Segment Information Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate two business segments: the acquisition, development, ownership and management of office real estate, and the acquisition, development, ownership and management of multifamily real estate. The services for our office segment include primarily rental of office space and other tenant services, including parking and storage space rental. The services for our multifamily segment include primarily rental of apartments and other tenant services, including parking and storage space rental. See Note 15 for our segment disclosures. F- 17 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Income Taxes We have elected to be taxed as a REIT under the Code, commencing with our initial taxable year ended December 31, 2006. To qualify as a REIT, we are required (among other things) to distribute at least 90% of our REIT taxable income to our stockholders and meet various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided that we qualify for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at the regular corporate rate, including any applicable alternative minimum tax for taxable years prior to 2018. We have elected to treat one of our subsidiaries as a TRS, which generally may engage in any business, including the provision of customary or non-customary services to our tenants. A TRS is treated as a regular corporation and is subject to federal income tax and applicable state income and franchise taxes at regular corporate rates. We had two TRSs in 2020 and 2019. Our TRSs did not have significant tax provisions or deferred income tax items for 2021, 2020 or 2019. Our subsidiaries (other than our TRS), including our Operating Partnership, are partnerships, disregarded entities, QRSs or REITs, as applicable, for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities or flow-through entities is reportable in the income tax returns of the respective owners. Accordingly, no income tax provision is included in our consolidated financial statements for these entities. New Accounting Pronouncements Changes to US GAAP are implemented by the FASB in the form of ASUs. We consider the applicability and impact of all ASUs. We did not adopt any ASUs during 2021, and as of the date of this Report, the FASB has not issued any ASUs that we expect to be applicable and have a material impact on our future consolidated financial statements. F- 18 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 3. Investment in Real Estate The table below summarizes our investment in real estate: (In thousands) December 31, 2021 December 31, 2020 Land $ 1,150,821 $ 1,150,821 Buildings and improvements (1) 9,344,087 9,344,653 Tenant improvements and lease intangibles 935,639 928,867 Property under development (1) 388,530 254,297 Investment in real estate, gross $ 11,819,077 $ 11,678,638 __________________________________________________________________________________ (1) During 2021, Property under development balances transferred to Building and improvements for real estate placed into service was $ 51.2 million. 2021 Property Acquisitions and Dispositions During 2021, we did not purchase or sell any properties. 2020 Property Disposition In December 2020, we closed on the sale of an 80,000 square foot office property in Honolulu for a contract price of $ 21.0 million in cash, resulting in a gain of $ 6.4 million after transaction costs. The property sold was held by one of our consolidated JVs in which we owned a two-thirds capital interest. The JV was subsequently dissolved prior to December 31, 2020. 2019 Property Acquisition and JV consolidation Acquisition of The Glendon On June 7, 2019, we acquired The Glendon, a residential community in Westwood, and on June 28, 2019, we contributed the property to a consolidated JV that we manage and in which we own a 20 % capital interest. The table below summarizes the purchase price allocation for the acquisition. The contract and purchase prices differ due to prorations and similar adjustments: (In thousands, except number of units) The Glendon Submarket West Los Angeles Acquisition date June 7, 2019 Contract price $ 365,100 Number of multifamily units 350 Retail square footage 50 Land $ 32,773 Buildings and improvements 333,624 Tenant improvements and lease intangibles 2,301 Acquired above- and below-market leases, net ( 2,114 ) Net assets and liabilities acquired $ 366,584 F- 19 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Consolidation of JV On November 21, 2019, we acquired an additional 16.3 % of the equity in one of our previously unconsolidated Funds, Fund X, in exchange for $ 76.9 million in cash and 332 thousand OP Units valued at $ 14.4 million, which increased our ownership in the Fund to 89.0 %. In connection with this transaction, we restructured the Fund with one remaining institutional investor. The new JV is a VIE, and as a result of the amended operating agreement, we became the primary beneficiary of the VIE and commenced consolidating the JV on November 21, 2019. The results of the consolidated JV are included in our operating results from November 21, 2019 (before November 21, 2019, our share of the Fund's net income was included in our statements of operations in Income from unconsolidated Funds). The consolidation of the JV required us to recognize the JVs identifiable assets and liabilities at fair value in our consolidated financial statements, along with the fair value of the non-controlling interest of $ 61.4 million. We recognized a gain of $ 307.9 million to adjust the carrying value of our existing investment in the JV to its estimated fair value upon consolidation. The gain was determined by taking the difference between: (a) the fair value of Fund X’s assets less its liabilities and (b) the sum of the fair value of the noncontrolling interest, carrying value of our existing investment in Fund X, and the amounts paid to acquire other Fund investors’ interests. We determined the fair value of Fund X’s assets and liabilities upon initial consolidation using our estimates of expected future cash flows and other valuation techniques. We estimated the fair values of Fund X’s properties by using the income and sales comparison valuation approaches which included, but are not limited to, our estimates of rental rates, comparable sales, revenue growth rates, capitalization rates and discount rates. Assumed debt was recorded at fair value based upon the present value of the expected future payments and current interest rates. Other acquired assets, including cash and assumed liabilities were recorded at cost due to the short-term nature of the balances. The JV owns six Class A office properties totaling 1.5 million square feet in the Los Angeles submarkets of Beverly Hills, Santa Monica, Sherman Oaks/Encino and Warner Center. The JV also owns an interest of 9.4 % in our remaining unconsolidated Fund, Partnership X, which owns two additional Class A office properties totaling 386,000 square feet in Beverly Hills and Brentwood. The table below summarizes the purchase price allocation for the initial consolidation of the JV: (In thousands) JV Consolidation Consolidation date November 21, 2019 Square footage 1,454 Land $ 52,272 Buildings and improvements 831,416 Tenant improvements and lease intangibles 40,890 Acquired above- and below-market leases, net ( 14,198 ) JV interest in unconsolidated Fund 28,783 Assumed debt ( 403,016 ) Assumed interest rate swaps ( 4,147 ) Other assets and liabilities, net 26,256 Net assets acquired and liabilities assumed $ 558,256 F- 20 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 4. Ground Lease We pay rent under a ground lease located in Honolulu, Hawaii, which expires on December 31, 2086. The rent is fixed at $ 733 thousand per year until February 28, 2029, after which it will reset to the greater of the existing ground rent or the market rent at that time. As of December 31, 2021, the ground lease right-of-use asset carrying value of this ground lease was $ 7.5 million and the ground lease liability was $ 10.9 million. Ground rent expense, which is included in Office expenses in our consolidated statements of operations, was $ 733 thousand during 2021, 2020 and 2019. The table below, which assumes that the ground rent payments will continue to be $ 733 thousand per year after February 28, 2029, presents the future minimum ground lease payments as of December 31, 2021: Year ending December 31: (In thousands) 2022 $ 733 2023 733 2024 733 2025 733 2026 733 Thereafter 43,979 Total future minimum lease payments $ 47,644 F- 21 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 5. Acquired Lease Intangibles Summary of our Acquired Lease Intangibles (In thousands) December 31, 2021 December 31, 2020 Above-market tenant leases $ 6,406 $ 6,848 Above-market tenant leases - accumulated amortization ( 3,132 ) ( 2,618 ) Above-market ground lease where we are the lessor 1,152 1,152 Above-market ground lease - accumulated amortization ( 258 ) ( 241 ) Acquired lease intangible assets, net $ 4,168 $ 5,141 Below-market tenant leases $ 58,209 $ 81,934 Below-market tenant leases - accumulated accretion ( 33,499 ) ( 46,711 ) Acquired lease intangible liabilities, net $ 24,710 $ 35,223 Impact on the Consolidated Statements of Operations The table below summarizes the net amortization/accretion related to our above- and below-market leases: Year Ended December 31, (In thousands) 2021 2020 2019 Net accretion of above- and below-market tenant lease assets and liabilities (1) $ 9,558 $ 15,895 $ 16,282 Amortization of an above-market ground lease asset (2) ( 17 ) ( 17 ) ( 18 ) Total $ 9,541 $ 15,878 $ 16,264 _______________________________________________________________________________________ (1) Recorded as a net increase to office and multifamily rental revenues. (2) Recorded as a decrease to office parking and other income. The table below presents the future net accretion related to our above- and below-market leases at December 31, 2021. Year ending December 31: Net increase to revenues (In thousands) 2022 $ 6,411 2023 4,447 2024 3,605 2025 2,917 2026 2,022 Thereafter 1,140 Total $ 20,542 F- 22 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 6. Investments in Unconsolidated Funds Description of our Funds As of December 31, 2021 and 2020, we managed and owned an equity interest of 33.5 % in an unconsolidated Fund, Partnership X, through which we and other investors in the Fund owned two office properties totaling 0.4 million square feet. We purchased an additional interest of 3.6 % in Partnership X for $ 6.6 million during 2020. Before November 21, 2019, we managed and owned equity interests in three unconsolidated Funds, consisting of 6.2 % of the Opportunity Fund, 72.7 % of Fund X and 28.4 % of Partnership X, through which we and other investors in the Funds owned eight office properties totaling 1.8 million square feet. On November 21, 2019, we acquired additional interests of 16.3 % in Fund X and 1.5 % in Partnership X, and restructured Fund X which resulted in Fund X being treated as a consolidated JV from November 21, 2019. See Note 3 for more information regarding the consolidation of the JV. We also acquired all of the investors’ ownership interests in the Opportunity Fund (The Opportunity Fund’s only investment was an ownership interest in Fund X) and closed the Opportunity Fund. During the period January 1, 2019 to November 20, 2019 we purchased additional interests of 1.4 % in Fund X and 3.9 % in Partnership X. Our Funds pay us fees and reimburse us for certain expenses related to property management and other services we provide, which are included in Other income in our consolidated statements of operations. We also receive distributions based on invested capital and on any profits that exceed certain specified cash returns to the investors. The table below presents cash distributions we received from our Funds: Year Ended December 31, (In thousands) 2021 2020 2019 Operating distributions received (1) $ 943 $ 394 $ 6,820 Capital distributions received (1) 1,342 1,236 5,853 Total distributions received (1) $ 2,285 $ 1,630 $ 12,673 __________________________________________________________ (1) The balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2021. Summarized Financial Information for our Funds The tables below present selected financial information for the Funds. The amounts presented reflect 100 % (not our pro-rata share) of amounts related to the Funds, and are based upon historical book value: (In thousands) December 31, 2021 December 31, 2020 Total assets (1) $ 139,171 $ 133,617 Total liabilities (1) $ 117,668 $ 112,706 Total equity (1) $ 21,503 $ 20,911 _______________________________________________ (1) The balances for both periods reflect the balances for Partnership X. F- 23 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Year Ended December 31, (In thousands) 2021 2020 2019 Total revenues (1) $ 17,185 $ 15,744 $ 75,952 Operating income (1) $ 4,921 $ 3,614 $ 22,269 Net income (1) $ 2,333 $ 887 $ 7,350 _________________________________________________ (1) The balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2021. 7. Other Assets (In thousands) December 31, 2021 December 31, 2020 Restricted cash $ 101 $ 132 Prepaid expenses 15,936 13,774 Other indefinite-lived intangibles 1,988 1,988 Furniture, fixtures and equipment, net 2,499 2,358 Other 5,197 3,331 Total other assets $ 25,721 $ 21,583 F- 24 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 8. Secured Notes Payable and Revolving Credit Facility, Net Description Maturity Date (1) Principal Balance as of December 31, 2021 Principal Balance as of December 31, 2020 Variable Interest Rate Fixed Interest Rate (2) Swap Maturity Date (In thousands) Consolidated Wholly-Owned Subsidiaries Term loan (3) $ — $ 300,000 Term loan (4) 3/3/2025 335,000 335,000 LIBOR + 1.30 % 3.84 % 3/1/2023 Fannie Mae loan (4) 4/1/2025 102,400 102,400 LIBOR + 1.25 % 2.76 % 3/1/2023 Term loan (4) 8/15/2026 415,000 415,000 LIBOR + 1.10 % 3.07 % 8/1/2025 Term loan (4) 9/19/2026 400,000 400,000 LIBOR + 1.15 % 2.44 % 9/1/2024 Term loan (4) 9/26/2026 200,000 200,000 LIBOR + 1.20 % 2.36 % 10/1/2024 Term loan (4)(5) 11/1/2026 400,000 400,000 LIBOR + 1.15 % 2.31 % 10/1/2024 Fannie Mae loan (4) 6/1/2027 550,000 550,000 LIBOR + 1.37 % 3.16 % 6/1/2022 Term loan (4)(6) 5/18/2028 300,000 — LIBOR + 1.40 % 2.21 % 6/1/2026 Term loan (4)(7) 1/1/2029 300,000 — SOFR + 1.56 % 3.42 % 1/1/2027 Fannie Mae loan (4) 6/1/2029 255,000 255,000 LIBOR + 0.98 % 3.26 % 6/1/2027 Fannie Mae loan (4) 6/1/2029 125,000 125,000 LIBOR + 0.98 % 3.25 % 6/1/2027 Term loan (8) 6/1/2038 29,325 30,112 N/A 4.55 % N/A Revolving credit facility (9) 8/21/2023 — 75,000 LIBOR + 1.15 % N/A N/A Total Wholly-Owned Subsidiary Debt 3,411,725 3,187,512 Consolidated JVs Term loan (3) — 580,000 Term loan (4) 12/19/2024 400,000 400,000 LIBOR + 1.30 % 3.47 % 1/1/2023 Term loan (4)(10) 5/15/2027 450,000 450,000 LIBOR + 1.35 % 3.04 % 4/1/2025 Term loan (4)(11) 8/19/2028 625,000 — LIBOR + 1.35 % 2.12 % 6/1/2025 Fannie Mae loan (4) 6/1/2029 160,000 160,000 LIBOR + 0.98 % 3.25 % 7/1/2027 Total Consolidated Debt (12)(13) 5,046,725 4,777,512 Unamortized loan premium, net (14) 4,007 4,467 Unamortized deferred loan costs, net (15) ( 38,656 ) ( 37,012 ) Total Consolidated Debt, net $ 5,012,076 $ 4,744,967 _____________________________________________________ Except as noted below, our loans and revolving credit facility: (i) are non-recourse, (ii) are secured by separate collateral pools consisting of one or more properties, (iii) require interest-only monthly payments with the outstanding principal due upon maturity, and (iv) contain certain financial covenants which could require us to deposit excess cash flow with the lender under certain circumstances unless we (at our option) either provide a guarantee or additional collateral or pay down the loan within certain parameters set forth in the loan documents. Certain loans with maturity date extension options require us to meet minimum financial thresholds in order to extend the loan maturity date. (1) Maturity dates include extension options. (2) Effective rate as of December 31, 2021. Includes the effect of interest rate swaps, and excludes the effect of prepaid loan fees and loan premiums. See Note 10 for details of our interest rate swaps. See further below for details of our loan costs and loan premiums. (3) We paid off these loans during 2021. (4) The loan agreement includes a zero -percent LIBOR floor. The corresponding swaps do not include such a floor. (5) The effective rate increased from 2.18 % to 2.31 % on July 1, 2021 due to the expiration of the prior swaps. (6) We closed this loan during the second quarter of 2021. (7) We closed this loan during the fourth quarter of 2021, and used the proceeds to pay off a loan secured by the same property. The interest rate decreased to 2.66 % on January 1, 2022. (8) Requires monthly payments of principal and interest. Principal amortization is based upon a 30 -year amortization schedule. F- 25 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) (9) $ 400.0 million revolving credit facility. Unused commitment fees range from 0.10 % to 0.15 %. The facility has a zero -percent LIBOR floor. (10) The effective rate will decrease to 2.26 % on July 1, 2022. (11) We closed this loan during the third quarter of 2021. (12) The table does not include our unconsolidated Fund's loan - see "Guarantees" in Note 17 for information about our Fund's loan. (13) See Note 14 for our debt and derivative fair value disclosures. (14) Balances are net of accumulated amortization of $ 3.2 million and $ 2.7 million at December 31, 2021 and December 31, 2020, respectively. (15) Balances are net of accumulated amortization of $ 46.3 million and $ 38.3 million at December 31, 2021 and December 31, 2020, respectively. Debt Statistics The table below summarizes our consolidated fixed and floating rate debt: (In thousands) Principal Balance as of December 31, 2021 Principal Balance as of December 31, 2020 Aggregate swapped to fixed rate loans $ 5,017,400 $ 4,672,400 Aggregate fixed rate loans 29,325 30,112 Aggregate floating rate loans — 75,000 Total Debt $ 5,046,725 $ 4,777,512 The table below summarizes certain consolidated debt statistics as of December 31, 2021: Statistics for consolidated loans with interest fixed under the terms of the loan or a swap Principal balance (in billions) $ 5.05 Weighted average remaining life (including extension options) 5.4 years Weighted average remaining fixed interest period 3.0 years Weighted average annual interest rate 2.94 % Future Principal Payments At December 31, 2021, the minimum future principal payments due on our consolidated secured notes payable and revolving credit facility were as follows: Year ending December 31: Including Maturity Extension Options (1) (In thousands) 2022 $ 823 2023 862 2024 400,902 2025 438,343 2026 1,415,987 Thereafter 2,789,808 Total future principal payments $ 5,046,725 ____________________________________________ (1) Some of our loan agreements require that we meet certain minimum financial thresholds to be able to extend the loan maturity. F- 26 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Loan Premium and Loan Costs The table below presents loan premium and loan costs, which are included in Interest expense in our consolidated statements of operations: Year Ended December 31, (In thousands) 2021 2020 2019 Loan premium amortized and written off $ ( 460 ) $ ( 2,274 ) $ ( 261 ) Deferred loan costs amortized and written off 10,902 7,832 14,314 Loan costs expensed 408 1,008 1,318 Total $ 10,850 $ 6,566 $ 15,371 9. Interest Payable, Accounts Payable and Deferred Revenue (In thousands) December 31, 2021 December 31, 2020 Interest payable $ 12,254 $ 12,199 Accounts payable and accrued liabilities 83,150 81,595 Deferred revenue 50,056 50,550 Total interest payable, accounts payable and deferred revenue $ 145,460 $ 144,344 F- 27 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 10. Derivative Contracts Derivative Summary As of December 31, 2021, all of our interest rate swaps, including our consolidated JVs' and our unconsolidated Fund's interest rate swaps, as summarized below, were designated as cash flow hedges: Number of Interest Rate Swaps Notional (In thousands) Consolidated derivatives (1)(2)(4)(5) 37 $ 5,317,400 Unconsolidated Fund's derivatives (3)(4)(5) 2 $ 115,000 ___________________________________________________ (1) The notional amount reflects 100 %, not our pro-rata share, of our consolidated JVs' derivatives. (2) The notional amount includes: a. Two swaps with a combined initial notional amount of $ 50.0 million, which will increase to $ 450.0 million on July 1, 2022 to replace existing swaps when they expire, and b. One swap with a notional amount of $ 300.0 million that will replace existing swaps when they expire on January 1, 2022. (3) The notional amount reflects 100 %, not our pro-rata share, of our unconsolidated Fund's derivatives. For more information about our Fund, including our equity interest percentage, see Note 6 . (4) Our derivative contracts do not provide for right of offset between derivative contracts. (5) See Note 14 for our derivative fair value disclosures. Credit-risk-related Contingent Features Our swaps include credit-risk related contingent features. For example, we have agreements with certain of our interest rate swap counterparties that contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness that we are hedging is accelerated by the lender due to our default on the indebtedness. As of December 31, 2021, there have been no events of default with respect to our interest rate swaps, our consolidated JVs' interest rate swaps, or our Fund's interest rate swaps. We do not post collateral for our interest rate swap contract liabilities. The fair value of our interest rate swap contract liabilities, including accrued interest and excluding credit risk adjustments, was as follows: (In thousands) December 31, 2021 December 31, 2020 Consolidated derivatives (1) $ 77,760 $ 225,166 Unconsolidated Fund's derivatives (2) $ — $ 208 ___________________________________________________ (1) Includes 100 %, not our pro-rata share, of our consolidated JVs' derivatives. (2) The amounts reflect 100 %, not our pro-rata share, of our unconsolidated Fund's derivatives. For more information about our Fund, including our equity interest percentage, see Note 6. F- 28 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Counterparty Credit Risk We are subject to credit risk from the counterparties on our interest rate swap contract assets because we do not receive collateral. We seek to minimize that risk by entering into agreements with a variety of high quality counterparties with investment grade ratings. The fair value of our interest rate swap contract assets, including accrued interest and excluding credit risk adjustments, was as follows: (In thousands) December 31, 2021 December 31, 2020 Consolidated derivatives (1)(3) $ 14,927 $ — Unconsolidated Fund's derivatives (2)(3) $ 1,889 $ — ___________________________________________________ (1) Includes 100 %, not our pro-rata share, of our consolidated JVs' derivatives. (2) The amounts reflect 100 %, not our pro-rata share, of our unconsolidated Fund's derivatives. For more information about our Fund, including our equity interest percentage, see Note 6. (3) We did not have any interest rate swap contract asset balances as of December 31, 2020. Impact of Hedges on AOCI and the Consolidated Statements of Operations The table below presents the effect of our derivatives on our AOCI and the consolidated statements of operations: (In thousands) Year Ended December 31, 2021 2020 2019 Derivatives Designated as Cash Flow Hedges: Consolidated derivatives: Gains (losses) recorded in AOCI before reclassifications (1) $ 82,876 $ ( 232,652 ) $ ( 76,273 ) Losses (gains) reclassified from AOCI to Interest Expense (1) $ 75,358 $ 49,435 $ ( 24,298 ) Interest Expense presented in the consolidated statements of operations $ ( 147,496 ) $ ( 142,872 ) $ ( 143,308 ) Unconsolidated Funds' derivatives (our share) (2) : Gains (losses) recorded in AOCI before reclassifications (1) $ 569 $ ( 410 ) $ ( 5,023 ) Losses (gains) reclassified from AOCI to Income from unconsolidated Funds (1) $ 120 $ 106 $ ( 1,698 ) Income from unconsolidated Funds presented in the consolidated statements of operations $ 946 $ 430 $ 6,923 __________________________________________________ (1) See Note 11 for our AOCI reconciliation. (2) We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund. For more information about our Funds, including our equity interest percentages, see Note 6. F- 29 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Future Reclassifications from AOCI At December 31, 2021, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next year as interest rate swap payments are made, is as follows: (In thousands) Consolidated derivatives: Losses to be reclassified from AOCI to Interest Expense $ ( 50,746 ) Unconsolidated Fund's derivatives (our share) (1) : Losses to be reclassified from AOCI to Income from unconsolidated Fund $ ( 148 ) ______________________________________________ (1) We calculate our share by multiplying the total amount for our Fund by our equity interest in the Fund. For more information about our Fund, including our equity interest percentage, see Note 6. F- 30 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 11. Equity Transactions During 2021: • We acquired 65 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units. • We acquired 4,051 OP Units for $ 122 thousand in cash. During 2020: • We acquired 94 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units. • We acquired 150 OP Units for $ 7 thousand in cash. During 2019: • We acquired 222 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units. • We acquired 19 thousand OP Units and fully-vested LTIP Units for $ 734 thousand in cash. • We issued 4.9 million shares of our common stock under our ATM program for net proceeds of $ 201.0 million. • We purchased a property on June 7, 2019 for a contract price of $ 365.1 million, which we subsequently contributed to one of our consolidated JVs on June 28, 2019. We manage and own a twenty percent capital interest in the JV. The acquisition and related working capital was funded with (i) a secured, non-recourse $ 160.0 million interest-only loan scheduled to mature in June 2029, which was assumed by the consolidated JV to which we contributed the property, (ii) a $ 44.0 million capital contribution by us to the JV, and (iii) a $ 176.0 million capital contribution by Noncontrolling interests in the JV. See Note 3 for more information regarding the property acquisition and Note 8 for more information regarding the loan. • On November 21, 2019, we acquired an additional 16.3 % of the equity in one of our previously unconsolidated Funds, Fund X, in exchange for $ 76.9 million in cash and 332 thousand OP Units valued at $ 14.4 million, which increased our ownership in the Fund to 89.0 %. See Note 3 for more information regarding the consolidation of the JV and note 6 for more information regarding our Funds. Noncontrolling Interests Our noncontrolling interests consist of interests in our Operating Partnership and consolidated JVs which are not owned by us. As of December 31, 2021, noncontrolling interests in our Operating Partnership owned 31.1 million OP Units and fully-vested LTIP Units, which represented approximately 15.0 % of our Operating Partnership's total outstanding interests, and we owned 175.5 million OP Units (to match our 175.5 million shares of outstanding common stock). A share of our common stock, an OP Unit and an LTIP Unit (once vested and booked up) have essentially the same economic characteristics, sharing equally in the distributions from our Operating Partnership. Investors who own OP Units have the right to cause our Operating Partnership to acquire their OP Units for an amount of cash per unit equal to the market value of one share of our common stock at the date of acquisition, or, at our election, exchange their OP Units for shares of our common stock on a one -for-one b asis. LTIP Units have been granted to our employees and non-employee directors as part of their compensation. These awards generally vest over a service period and once vested can generally be converted to OP Units provided our stock price increases by more than a specified hurdle. F- 31 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Changes in our Ownership Interest in our Operating Partnership The table below presents the effect on our equity from net income attributable to common stockholders and changes in our ownership interest in our Operating Partnership: Year Ended December 31, (In thousands) 2021 2020 2019 Net income attributable to common stockholders $ 65,267 $ 50,421 $ 363,713 Transfers from noncontrolling interests: Exchange of OP Units with noncontrolling interests 1,056 1,535 3,540 Repurchase of OP Units from noncontrolling interests ( 57 ) ( 4 ) ( 431 ) Net transfers from noncontrolling interests 999 1,531 3,109 Change from net income attributable to common stockholders and transfers from noncontrolling interests $ 66,266 $ 51,952 $ 366,822 AOCI Reconciliation (1) The table below presents a reconciliation of our AOCI, which consists solely of adjustments related to derivatives designated as cash flow hedges: Year Ended December 31, (In thousands) 2021 2020 2019 Beginning balance $ ( 148,035 ) $ ( 17,462 ) $ 53,944 Consolidated derivatives: Other comprehensive income (loss) before reclassifications 82,876 ( 232,652 ) ( 76,273 ) Reclassification of loss (income) from AOCI to Interest Expense 75,358 49,435 ( 24,298 ) Unconsolidated Funds' derivatives (our share) (2) : Other comprehensive income (loss) before reclassifications 569 ( 410 ) ( 5,023 ) Reclassification of loss (income) from AOCI to Income from unconsolidated Funds 120 106 ( 1,698 ) Net current period OCI 158,923 ( 183,521 ) ( 107,292 ) OCI attributable to noncontrolling interests ( 49,662 ) 52,948 35,886 OCI attributable to common stockholders 109,261 ( 130,573 ) ( 71,406 ) Ending balance $ ( 38,774 ) $ ( 148,035 ) $ ( 17,462 ) __________________________________________________ (1) See Note 10 for the details of our derivatives and Note 14 for our derivative fair value disclosures. (2) We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund. F- 32 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Dividends (unaudited) Our common stock dividends paid during 2021 are classified for federal income tax purposes as follows: Record Date Paid Date Dividend Per Share Ordinary Income % Capital Gain % Return of Capital % Section 199A Dividend % 12/31/2020 1/15/2021 $ 0.28 53.0 % — % 47.0 % 53.0 % 3/31/2021 4/15/2021 0.28 53.0 % — % 47.0 % 53.0 % 6/30/2021 7/15/2021 0.28 53.0 % — % 47.0 % 53.0 % 9/30/2021 10/15/2021 0.28 53.0 % — % 47.0 % 53.0 % Total / Weighted Average $ 1.12 53.0 % — % 47.0 % 53.0 % 12. EPS The table below presents the calculation of basic and diluted EPS: Year Ended December 31, 2021 2020 2019 Numerator (In thousands): Net income attributable to common stockholders $ 65,267 $ 50,421 $ 363,713 Allocation to participating securities: Unvested LTIP Units ( 876 ) ( 830 ) ( 1,594 ) Net income attributable to common stockholders - basic and diluted $ 64,391 $ 49,591 $ 362,119 Denominator (In thousands): Weighted average shares of common stock outstanding - basic and diluted (1) 175,478 175,380 173,358 Net income per common share - basic and diluted $ 0.37 $ 0.28 $ 2.09 ____________________________________________________ (1) Outstanding OP Units and vested LTIP Units are not included in the denominator in calculating diluted EPS, even though they may be exchanged under certain conditions for common stock on a one -for-one basis, because their associated net income (equal on a per unit basis to the Net income per common share - diluted) was already deducted in calculating Net income attributable to common stockholders. Accordingly, any exchange would not have any effect on diluted EPS. The table below presents the weighted average OP Units and vested LTIP Units outstanding for the respective periods: Year Ended December 31, (In thousands) 2021 2020 2019 OP Units 28,643 28,288 26,465 Vested LTIP Units 1,439 815 1,652 F- 33 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 13. Stock-Based Compensation Stock Incentive Plans The Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan, as amended, our stock incentive plan (our "2016 Plan"), permits us to make grants of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards. On May 28, 2020, our stockholders approved an amendment to the 2016 Plan to, among other things, increase the number of common shares for future awards by 9.5 million. We had an aggregate of 6.9 million shares available for grant as of December 31, 2021. Awards such as LTIP Units, deferred stock and restricted stock, which deliver the full value of the underlying shares, are counted against the Plan limits as two shares. Awards such as stock options and stock appreciation rights are counted as one share. The number of shares reserved under our 2016 Plan is also subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. Shares of stock underlying any awards that are forfeited, canceled or otherwise terminated (other than by exercise) are added back to the shares of stock available for future issuance under the 2016 Plan. For options exercised, our policy is to issue common stock on a net settlement basis - net of the exercise price and related taxes. Until it expired in 2016, we made grants under our 2006 Omnibus Stock Incentive Plan (our "2006 Plan"), which was substantially similar to our 2016 Plan. No further awards may be granted under our 2006 Plan, although awards granted under the 2006 Plan in the past and which are still outstanding will continue to be governed by the terms of our 2006 Plan. Our 2016 and 2006 Plans (the "Plans") are administered by the compensation committee of our board of directors. The compensation committee may interpret our Plans and make all determinations necessary or desirable for the administration of our Plans. The committee has full power and authority to select the participants to whom awards will be granted, to make any combination of awards to participants, to accelerate the exercisability or vesting of any award and to determine the specific terms and conditions of each award, subject to the provisions of our Plans. All officers, employees, directors and other key personnel (including consultants and prospective employees) are eligible to participate in our 2016 Plan. We have made certain awards in the form of a separate series of units of limited partnership interests in our Operating Partnership called LTIP Units, which can be granted either as free-standing awards or in tandem with other awards under our 2016 Plan. Our LTIP Units are valued by reference to the value of our common stock at the time of grant, and are subject to such conditions and restrictions as the compensation committee may determine, including continued employment or service, and/or achievement of pre-established performance goals, financial metrics and other objectives. Once vested, LTIP Units can generally be converted to OP Units on a one for one basis, provided our stock price increases by more than a specified hurdle. Employee Awards We grant stock-based compensation in the form of LTIP Units as a part of our annual incentive compensation to various employees each year, a portion which vests at the date of grant, and the remainder which vests in three equal annual installments over the three calendar years following the grant date. Compensation expense for LTIP Units which are not vested at the grant date is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. We have also made long-term grants in the form of LTIP Units to certain employees, which generally vest in equal annual installments over four to five calendar years following the grant date, and some of these grants include a portion which vests at the date of grant. In aggregate, we granted 1.1 million, 1.1 million, and 802 thousand LTIP Units to employees during 2021, 2020 and 2019, respectively. Non-Employee Director Awards As annual fees for their services, each of our non-employee directors receives a grant of LTIP Units that vests on a quarterly basis during the year the services are rendered, which is the calendar year following the grant date. In aggregate, we granted 52 thousand, 55 thousand, and 38 thousand LTIP Units to our non-employee directors during 2021, 2020 and 2019, respectively. F- 34 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Compensation Expense At December 31, 2021, the total unrecognized stock-based compensation expense for unvested LTIP Unit awards was $ 19.5 million, which will be recognized over a weighted-average term of 2 years. The table below presents our stock-based compensation expense: Year Ended December 31, (In thousands) 2021 2020 2019 Stock-based compensation expense, net $ 20,887 $ 21,365 $ 18,359 Capitalized stock-based compensation $ 6,183 $ 5,448 $ 4,698 Stock-Based Award Activity The table below presents our unvested LTIP Units activity: Unvested LTIP Units: Number of Units (Thousands) Weighted Average Grant Date Fair Value Grant Date Fair Value (Thousands) Outstanding at December 31, 2018 945 $ 28.20 Granted 840 $ 31.92 $ 26,821 Vested ( 826 ) $ 29.13 $ 24,061 Forfeited ( 35 ) $ 35.41 $ 1,234 Outstanding at December 31, 2019 924 $ 30.48 Granted 1,190 $ 21.12 $ 25,175 Vested ( 1,073 ) $ 24.58 $ 26,369 Forfeited ( 57 ) $ 28.20 $ 1,623 Outstanding at December 31, 2020 984 $ 25.71 Granted 1,121 $ 24.64 $ 27,631 Vested ( 1,073 ) $ 25.05 $ 26,871 Forfeited ( 17 ) $ 28.69 $ 501 Outstanding at December 31, 2021 1,015 $ 25.17 F- 35 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 14. Fair Value of Financial Instruments Our estimates of the fair value of financial instruments were determined using available market information and widely used valuation methods. Considerable judgment is necessary to interpret market data and determine an estimated fair value. The use of different market assumptions or valuation methods may have a material effect on the estimated fair values. The FASB fair value framework hierarchy distinguishes between assumptions based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market-based inputs. The hierarchy is as follows: Level 1 - inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - inputs are observable either directly or indirectly for similar assets and liabilities in active markets. Level 3 - inputs are unobservable assumptions generated by the reporting entity As of December 31, 2021, we did not have any fair value estimates of financial instruments using Level 3 inputs. Financial instruments disclosed at fair value Short term financial instruments The carrying amounts for cash and cash equivalents, tenant receivables, revolving credit line, interest payable, accounts payable, security deposits and dividends payable approximate fair value because of the short-term nature of these instruments. Secured notes payable See Note 8 for the details of our secured notes payable. We estimate the fair value of our consolidated secured notes payable by calculating the credit-adjusted present value of the principal and interest payments for each secured note payable. The calculation incorporates observable market interest rates which we consider to be Level 2 inputs, assumes that the loans will be outstanding through maturity, and includes any maturity extension options. The table below presents the estimated fair value and carrying value of our secured notes payable (excluding our revolving credit facility), the carrying value includes unamortized loan premium and excludes unamortized deferred loan fees: (In thousands) December 31, 2021 December 31, 2020 Fair value $ 5,017,494 $ 4,719,462 Carrying value $ 5,050,732 $ 4,706,979 Ground lease liability See Note 4 for the details of our ground lease. We estimate the fair value of our ground lease liability by calculating the present value of the future lease payments disclosed in Note 4 using our incremental borrowing rate. The calculation incorporates observable market interest rates which we consider to be Level 2 inputs. The table below presents the estimated fair value and carrying value of our ground lease liability: (In thousands) December 31, 2021 December 31, 2020 Fair value $ 8,861 $ 11,865 Carrying value $ 10,860 $ 10,871 F- 36 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Financial instruments measured at fair value Derivative instruments See Note 10 for the details of our derivatives. We present our derivatives in the consolidated balance sheets at fair value, on a gross basis, excluding accrued interest. We estimate the fair value of our derivative instruments by calculating the credit-adjusted present value of the expected future cash flows of each derivative. The calculation incorporates the contractual terms of the derivatives, observable market interest rates which we consider to be Level 2 inputs, and credit risk adjustments to reflect the counterparty's as well as our own nonperformance risk. Our derivatives are not subject to master netting arrangements. The table below presents the estimated fair value of our derivatives: (In thousands) December 31, 2021 December 31, 2020 Derivative Assets: Fair value - c onsolidated derivatives (1) $ 15,473 $ — Fair value - unconsolidated Fund's derivatives (2) $ 1,963 $ — Derivative Liabilities: Fair value - c onsolidated derivatives (1) $ 69,930 $ 214,016 Fair value - unconsolidated Fund's derivatives (2) $ — $ 137 ___________________________________________________________________________________ (1) Consolidated derivatives, which include 100 %, not our pro-rata share, of our consolidated JVs' derivatives, are included in interest rate contracts in our consolidated balance sheets. The fair values exclude accrued interest which is included in interest payable in the consolidated balance sheets. (2) The amounts reflect 100 %, not our pro-rata share, of our unconsolidated Fund's derivatives. Our pro-rata share of the amounts related to the unconsolidated Fund's derivatives is included in our Investment in unconsolidated Fund in our consolidated balance sheets. See Note 6 for more information about our Fund, including our equity interest percentage, and see "Guarantees" in Note 17 regarding our Fund's derivatives. F- 37 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 15. Segment Reporting Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in two business segments: (i) the acquisition, development, ownership and management of office real estate and (ii) the acquisition, development, ownership and management of multifamily real estate. The services for our office segment primarily include rental of office space and other tenant services, including parking and storage space rental. The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level. The table below presents the operating activity of our reportable segments: (In thousands) Year Ended December 31, 2021 2020 2019 Office Segment Total office revenues $ 786,870 $ 771,169 $ 816,755 Office expenses ( 265,376 ) ( 268,259 ) ( 264,482 ) Office segment profit 521,494 502,910 552,273 Multifamily Segment Total multifamily revenues 131,527 120,354 119,927 Multifamily expenses ( 38,025 ) ( 37,154 ) ( 33,681 ) Multifamily segment profit 93,502 83,200 86,246 Total profit from all segments $ 614,996 $ 586,110 $ 638,519 The table below presents a reconciliation of the total profit from all segments to net income attributable to common stockholders: (In thousands) Year Ended December 31, 2021 2020 2019 Total profit from all segments $ 614,996 $ 586,110 $ 638,519 General and administrative expenses ( 42,554 ) ( 39,601 ) ( 38,068 ) Depreciation and amortization ( 371,289 ) ( 385,248 ) ( 357,743 ) Other income 2,465 16,288 11,653 Other expenses ( 937 ) ( 2,947 ) ( 7,216 ) Income from unconsolidated Funds 946 430 6,923 Interest expense ( 147,496 ) ( 142,872 ) ( 143,308 ) Gain on sale of investment in real estate — 6,393 — Gain from consolidation of JV — — 307,938 Net income 56,131 38,553 418,698 Less: Net loss (income) attributable to noncontrolling interests 9,136 11,868 ( 54,985 ) Net income attributable to common stockholders $ 65,267 $ 50,421 $ 363,713 F- 38 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) 16. Future Minimum Lease Rental Receipts We lease space to tenants primarily under non-cancelable operating leases that generally contain provisions for a base rent plus reimbursement of certain operating expenses, and we own fee interests in two parcels of land from which we receive rent under ground leases. The table below presents the future minimum base rentals on our non-cancelable office tenant and ground leases for our consolidated properties at December 31, 2021: Year Ending December 31, (In thousands) 2022 $ 631,237 2023 532,400 2024 430,313 2025 329,703 2026 242,889 Thereafter 674,848 Total future minimum base rentals (1) $ 2,841,390 _____________________________________________________ (1) Does not include (i) residential leases, which typically have a term of one year or less, (ii) holdover rent, (iii) other types of rent such as storage and antenna rent, (iv) tenant reimbursements, (v) straight line rent, (vi) amortization/accretion of acquired above/below-market lease intangibles, and (vii) percentage rents. The amounts assume that early termination options held by tenants will not be exercised. 17. Commitments, Contingencies and Guarantees Legal Proceedings From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations. Concentration of Risk Tenant Receivables We are subject to credit risk with respect to our tenant receivables and deferred rent receivables related to our tenant leases. Our tenants' ability to honor the terms of their respective leases remains dependent upon economic, regulatory and social factors. We seek to minimize our credit risk from our tenant leases by: (i) targeting smaller, more affluent office tenants, from a diverse mix of industries, (ii) performing credit evaluations of prospective tenants, and (iii) obtaining security deposits or letters of credit from our tenants. During 2021, 2020 and 2019, no tenant accounted for more than 10% of our total revenues. See our "Rental Revenues and Tenant Recoveries" accounting policy in Note 2 for the charges to revenue for uncollectible amounts for tenant receivables and deferred rent receivables. Geographic Risk All of our properties, including the properties of our consolidated JVs and our unconsolidated Fund, are located in Los Angeles County, California and Honolulu, Hawaii, and we are therefore susceptible to adverse economic and regulatory developments, as well as natural disasters, in those markets. Swap Counterparty Credit Risk We are subject to credit risk with respect to our interest rate swap counterparties that we use to manage the risk associated with our floating rate debt. We do not post or receive collateral with respect to our swap transactions. Our swap contracts do not provide for right of offset between derivative contracts. See Note 10 for the details of our interest rate contracts. We seek to minimize our credit risk by entering into agreements with a variety of counterparties with investment grade ratings. F- 39 Table of Contents Douglas Emmett, Inc. Notes to Consolidated Financial Statements (continued) Cash Balances We have significant cash balances invested in a variety of short-term money market funds that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments are not insured against loss of principal and there is no guarantee that our investments in these funds will be redeemable at par value. We also have significant cash balances in bank accounts with high quality financial institutions with investment grade ratings. Interest bearing bank accounts at each U.S. banking institution are insured by the FDIC up to $250 thousand. Asset Retirement Obligations Conditional asset retirement obligations represent a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within our control. A liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments have identified thirty-two buildings in our Consolidated Portfolio which contain asbestos, and would have to be removed in compliance with applicable environmental regulations if these properties are demolished or undergo major renovations. As of December 31, 2021, the obligations to remove the asbestos from properties which are currently undergoing major renovations, or that we plan to renovate in the future, are not material to our consolidated financial statements. As of December 31, 2021, the obligations to remove the asbestos from our other properties have indeterminable settlement dates, and we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligations. Contractual Commitments Development Projects In West Los Angeles, we are building a high-rise apartment building with 376 apartments. In downtown Honolulu, we are converting a 25 story, 493,000 square foot office tower into approximately 493 apartments in phases over a number of years as the office space is vacated. As of December 31, 2021, we had an aggregate remaining contractual commitment for these and other development projects of approximately $ 69.7 million. Other Contractual Commitments As of December 31, 2021, we had an aggregate remaining contractual commitment for repositionings, capital expenditure projects and tenant improvements of approximately $ 22.0 million. Guarantees Partnership X Guarantees Our unconsolidated Fund, Partnership X, has a $ 115.0 million floating-rate term loan that matures on September 14, 2028 . Starting on October 1, 2021, the loan carried interest at LIBOR + 1.35 % (with a zero-percent LIBOR floor), which has been effectively fixed at 2.19 % until October 1, 2026 with interest rate swaps (which do not have zero-percent LIBOR floors). The loan is secured by two properties held by Partnership X and is non-recourse. We have made certain environmental and other limited indemnities and guarantees covering customary non-recourse carve-outs for Partnership X's loan, and we have also guaranteed the related swaps. Partnership X has agreed to indemnify us for any amounts that we would be required to pay under these agreements. As of December 31, 2021, assuming that LIBOR does not decrease below zero-percent, the maximum future interest payments for the swap were $ 4.7 million. As of December 31, 2021, all of the obligations under the related loan and swap agreements have been performed in accordance with the terms of those agreements. See Note 6 for more information about Partnership X. F- 40 Table of Contents Douglas Emmett, Inc. Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization As of December 31, 2021 (In thousands) Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount Property Name Encumb-rances Land Building & Improve-ments (2) Improve-ments (2)(3) Land Building & Improve-ments (2)(3) Total (4) Accumulated Depreciation & Amortization (3) (5) Year Built / Renovated Year Acquired Office Properties 100 Wilshire $ 252,034 $ 12,769 $ 78,447 $ 152,275 $ 27,108 $ 216,383 $ 243,491 $ 83,854 1968/2002/2019 1999 233 Wilshire 62,962 9,263 130,426 3,120 9,263 133,546 142,809 21,681 1975/2008-2009 2016 401 Wilshire — 9,989 29,187 135,480 21,787 152,869 174,656 58,099 1981/2000/2020 1996 429 Santa Monica 33,691 4,949 72,534 3,263 4,949 75,797 80,746 11,668 1982/2016 2017 1132 Bishop Place — 8,317 105,651 ( 26,726 ) 8,833 78,409 87,242 51,525 1992 2004 1299 Ocean 124,699 22,748 265,198 18,584 22,748 283,782 306,530 38,240 1980/2006/2020 2017 1901 Avenue of the Stars 193,502 18,514 131,752 115,919 26,163 240,022 266,185 96,934 1968/2001 2001 2001 Wilshire 37,411 5,711 81,622 1,931 5,711 83,553 89,264 5,788 1980/2013 2008 8383 Wilshire 175,314 18,004 328,118 3,987 18,005 332,104 350,109 24,823 1971/2009 2008 8484 Wilshire(1) — 8,846 77,780 16,261 8,846 94,041 102,887 27,598 1972/2013 2013 9100 Wilshire 142,264 13,455 258,329 3,478 13,455 261,807 275,262 18,164 1971/2016 2008 9401 Wilshire 29,325 6,740 152,310 13,569 6,740 165,879 172,619 21,595 1971/2020 2017 9601 Wilshire — 16,597 54,774 107,270 17,658 160,983 178,641 66,757 1962/2004 2001 9665 Wilshire 77,445 5,568 177,072 22,222 5,568 199,294 204,862 25,443 1971/2020 2017 10880 Wilshire 207,712 29,995 437,514 34,356 29,988 471,877 501,865 81,712 1970/2009/2020 2016 10960 Wilshire 209,575 45,844 429,769 31,878 45,852 461,639 507,491 83,509 1971/2006 2016 11777 San Vicente 44,412 5,032 15,768 29,328 6,714 43,414 50,128 18,274 1974/1998 1999 12100 Wilshire 101,203 20,164 208,755 8,246 20,164 217,001 237,165 38,076 1985 2016 12400 Wilshire — 5,013 34,283 75,248 8,828 105,716 114,544 43,100 1985 1996 15250 Ventura 22,369 2,130 48,908 1,288 2,130 50,196 52,326 3,919 1970/2012 2008 16000 Ventura 37,971 1,936 89,531 1,281 1,936 90,812 92,748 6,780 1980/2011 2008 16501 Ventura 42,944 6,759 53,112 11,199 6,759 64,311 71,070 17,338 1986/2012 2013 Beverly Hills Medical Center 46,180 4,955 27,766 30,371 6,435 56,657 63,092 23,082 1964/2004 2004 Bishop Square 200,000 16,273 213,793 43,092 16,273 256,885 273,158 83,313 1972/1983 2010 Brentwood Court — 2,564 8,872 1,165 2,563 10,038 12,601 4,188 1984 2006 Brentwood Executive Plaza — 3,255 9,654 33,298 5,921 40,286 46,207 16,740 1983/1996 1995 Brentwood Medical Plaza — 5,934 27,836 1,887 5,933 29,724 35,657 12,482 1975 2006 Brentwood San Vicente Medical — 5,557 16,457 2,264 5,557 18,721 24,278 7,345 1957/1985 2006 Brentwood/Saltair — 4,468 11,615 11,690 4,775 22,998 27,773 10,401 1986 2000 Bundy/Olympic — 4,201 11,860 28,681 6,030 38,712 44,742 15,880 1991/1998 1994 Camden Medical Arts 42,276 3,102 12,221 28,983 5,298 39,008 44,306 15,698 1972/1992 1995 Carthay Campus — 6,595 70,454 5,684 6,594 76,139 82,733 19,174 1965/2008 2014 Century Park Plaza 173,000 10,275 70,761 136,374 16,153 201,257 217,410 73,908 1972/1987/2020 1999 Century Park West(1) — 3,717 29,099 252 3,667 29,401 33,068 12,058 1971 2007 Columbus Center — 2,096 10,396 9,358 2,333 19,517 21,850 8,312 1987 2001 Coral Plaza — 4,028 15,019 18,450 5,366 32,131 37,497 13,442 1981 1998 Cornerstone Plaza(1) — 8,245 80,633 5,868 8,263 86,483 94,746 33,771 1986 2007 Encino Gateway — 8,475 48,525 55,039 15,653 96,386 112,039 40,474 1974/1998 2000 Encino Plaza — 5,293 23,125 47,267 6,165 69,520 75,685 30,043 1971/1992 2000 Encino Terrace 105,565 12,535 59,554 103,037 15,533 159,593 175,126 63,434 1986 1999 Executive Tower(1) — 6,660 32,045 57,948 9,471 87,182 96,653 35,982 1989 1995 F- 41 Table of Contents Douglas Emmett, Inc. Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization As of December 31, 2021 (In thousands) Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount Property Name Encumb-rances Land Building & Improve-ments (2) Improve- ments (2)(3) Land Building & Improve-ments (2)(3) Total (4) Accumulated Depreciation & Amortization (3) (5) Year Built / Renovated Year Acquired Office Properties (continued) First Financial Plaza 54,077 12,092 81,104 3,747 12,092 84,851 96,943 18,679 1986 2015 Gateway Los Angeles — 2,376 15,302 55,352 5,119 67,911 73,030 25,910 1987 1994 Harbor Court — 51 41,001 51,198 12,060 80,190 92,250 28,663 1994 2004 Landmark II — 6,086 109,259 67,645 13,070 169,920 182,990 71,622 1989 1997 Lincoln/Wilshire — 3,833 12,484 26,861 7,475 35,703 43,178 12,887 1996 2000 MB Plaza — 4,533 22,024 34,295 7,503 53,349 60,852 21,832 1971/1996 1998 Olympic Center 52,000 5,473 22,850 35,293 8,247 55,369 63,616 22,956 1985/1996 1997 One Westwood(1) — 10,350 29,784 62,816 9,194 93,756 102,950 38,243 1987/2004 1999 Palisades Promenade 60,318 5,253 15,547 54,431 9,664 65,567 75,231 27,544 1990 1995 Saltair/San Vicente 21,533 5,075 6,946 17,330 7,557 21,794 29,351 9,207 1964/1992 1997 San Vicente Plaza — 7,055 12,035 65 7,055 12,100 19,155 5,229 1985 2006 Santa Monica Square 48,500 5,366 18,025 21,521 6,863 38,049 44,912 15,437 1983/2004 2001 Second Street Plaza — 4,377 15,277 35,924 7,421 48,157 55,578 20,276 1991 1997 Sherman Oaks Galleria 300,000 33,213 17,820 418,158 48,328 420,863 469,191 172,019 1981/2002 1997 Studio Plaza — 9,347 73,358 122,019 15,015 189,709 204,724 80,398 1988/2004 1995 The Tower 67,064 9,643 160,602 4,434 9,643 165,036 174,679 29,575 1988/1998 2016 The Trillium(1) — 20,688 143,263 81,952 21,989 223,914 245,903 90,009 1988/2021 2005 Valley Executive Tower 104,000 8,446 67,672 108,496 11,737 172,877 184,614 69,566 1984 1998 Valley Office Plaza — 5,731 24,329 47,107 8,957 68,210 77,167 28,469 1966/2002 1998 Verona — 2,574 7,111 15,373 5,111 19,947 25,058 8,175 1991 1997 Village on Canon 61,745 5,933 11,389 50,945 13,303 54,964 68,267 22,171 1989/1995 1994 Warner Center Towers 335,000 43,110 292,147 420,312 59,418 696,151 755,569 288,841 1982-1993/2004 2002 Warner Corporate Center 34,671 11,035 65,799 2,086 11,035 67,885 78,920 6,122 1988/2015 2008 Westside Towers 141,915 8,506 79,532 79,467 14,568 152,937 167,505 62,549 1985 1998 Westwood Center 140,648 9,512 259,341 10,732 9,513 270,072 279,585 49,439 1965/2000 2016 Westwood Place 71,000 8,542 44,419 52,916 11,448 94,429 105,877 38,502 1987 1999 Multifamily Properties 555 Barrington 50,000 6,461 27,639 41,143 14,903 60,340 75,243 24,904 1989 1999 Barrington Plaza 210,000 28,568 81,485 147,952 58,208 199,797 258,005 83,729 1963/1998 1998 Barrington/Kiowa 13,940 5,720 10,052 909 5,720 10,961 16,681 4,557 1974 2006 Barry 11,370 6,426 8,179 650 6,426 8,829 15,255 3,773 1973 2006 Kiowa 5,470 2,605 3,263 626 2,605 3,889 6,494 1,597 1972 2006 Moanalua Hillside Apartments 255,000 24,791 157,353 122,383 35,365 269,162 304,527 62,113 1968/2004/2019 2005 The Residences at Bishop Place — — — 86,256 — 86,256 86,256 3,031 2020-2021 N/A Pacific Plaza 78,000 10,091 16,159 75,106 27,816 73,540 101,356 29,471 1963/1998 1999 The Glendon 160,000 32,773 335,925 2,201 32,775 338,124 370,899 24,720 2008 2019 The Shores 212,000 20,809 74,191 200,990 60,555 235,435 295,990 94,317 1965-67/2002 1999 Villas at Royal Kunia 94,220 42,887 71,376 15,337 35,163 94,437 129,600 44,260 1990/1995 2006 Waena Apartments 102,400 26,864 119,273 1,900 26,864 121,173 148,037 23,249 1970/2009-2014 2014 F- 42 Table of Contents Douglas Emmett, Inc. Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization As of December 31, 2021 (In thousands) Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount Property Name Encumb-rances Land Building & Improve-ments (2) Improve- ments (2)(3) Land Building & Improve-ments (2)(3) Total (4) Accumulated Depreciation & Amortization (3) (5) Year Built / Renovated Year Acquired Ground Lease Owensmouth/Warner — 23,848 — — 23,848 — 23,848 — N/A 2006 Total Operating Properties $ 5,046,725 $ 876,614 $ 6,593,840 $ 3,960,093 $ 1,150,821 $ 10,279,726 $ 11,430,547 $ 3,028,645 Property Under Development The Residences at Bishop Place $ — $ — $ — $ 48,815 $ — $ 48,815 $ 48,815 N/A N/A The Landmark Los Angeles — 13,070 — 305,041 13,070 305,041 318,111 N/A N/A Other Developments 21,604 21,604 21,604 N/A N/A Total Property Under Development $ — $ 13,070 $ — $ 375,460 $ 13,070 $ 375,460 $ 388,530 $ — Total $ 5,046,725 $ 889,684 $ 6,593,840 $ 4,335,553 $ 1,163,891 $ 10,655,186 $ 11,819,077 $ 3,028,645 _____________________________________________________ (1) These properties are encumbered by our revolving credit facility, which had no balance as of December 31, 2021. (2) Includes tenant improvements and lease intangibles. (3) Net of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles removed from our books. (4) At December 31, 2021, the aggregate federal income tax cost basis for consolidated real estate was $ 8.06 billion (unaudited). (5) See our depreciation and amortization policy in Note 2 to our consolidated financial statements. The table below presents a reconciliation of our investment in real estate: Year Ended December 31, 2021 2020 2019 Investment in real estate, gross Beginning balance $ 11,678,638 $ 11,478,633 $ 10,030,708 Property acquisitions — — 368,698 Consolidation of JV — — 924,578 Improvements and developments 297,764 297,558 242,854 Properties sold — ( 24,508 ) — Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles ( 157,325 ) ( 73,045 ) ( 88,205 ) Ending balance $ 11,819,077 $ 11,678,638 $ 11,478,633 Accumulated depreciation and amortization Beginning balance $ ( 2,816,193 ) $ ( 2,518,415 ) $ ( 2,246,887 ) Depreciation and amortization ( 371,289 ) ( 385,248 ) ( 357,743 ) Properties sold — 10,002 — Other accumulated depreciation and amortization 1,512 4,423 ( 1,990 ) Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles 157,325 73,045 88,205 Ending balance $ ( 3,028,645 ) $ ( 2,816,193 ) $ ( 2,518,415 ) Investment in real estate, net $ 8,790,432 $ 8,862,445 $ 8,960,218 F- 43